Free up councils and share the pain

As TUC delegates swap dark scenarios and public approval of the coalition falls, it’s time for councils to join the ‘big society’ too

A tidal wave of protest is rolling towards the coalition government, roaring, foaming, darkening the sky, sucking every political argument into a lethal wall of water. This week delegates to the TUC, freed from decades of impotence, joyfully surfed its crest. Their boss, Brendan Barber, gleefully hailed “a darker, more brutish, more frightening” Britain ahead. Next month the Labour party will do likewise, chanting against the hardy hobgoblins of banking, tax-dodging and Toryism.

Each day a new cuts horror is declared by a breathless BBC. The disabled will limp down deserted streets. The sick will go untended. The Red Arrows will be disbanded. The police will be unable, they absurdly assert, to prevent another Peterloo. Britain no longer has a government, it seems, merely four horsemen from Apocalypse plc.

The argument has gone potty. If George Osborne were to achieve his entire cuts programme, total public spending will fall in real terms from £664bn today to £640bn (at constant 2008 prices) in 2015 – and actually rise in cash terms. This compares with £449bn at the end of Tony Blair’s first parliament in 2001. In other words, Osborne will take spending back no more than five years, to the mid-Blair era.

This is the measure of the spending splurge that took place under Gordon Brown at the Treasury. Osborne cannot hope to reverse all of this. Admittedly the makeup of spending must change, to reflect the soaring cost of debt (from £43bn to £66bn in five years). But even taking debt and fixed benefits out of the total, the Treasury is proposing no more than a five-year cash freeze on public services, at roughly £340bn.

Osborne’s much-vaunted 25% cuts option over five years is to protect his existing ringfenced budgets, such as the NHS. Even so, few spending departments or local councils will lose more over these five years than they won over the last. If every department froze pay and recruitment, there would be no need for anyone to lose a job. The cuts proposed by local councils, blamed on central government, are probably beyond what is needed.

For the TUC and others to portray all this as a return to the Great Depression, to an “era of unprecedented austerity” and to “fear stalking the streets” is ridiculous. The left would do better to focus attention on the 2011 VAT rise and the risk of a renewed “double-dip” recession in high street spending. The message of the cuts campaign so far is that organised labour is no longer concerned with the health of the private economy. It is a public sector lobby.

From David Cameron’s standpoint, all this is spitting in the wind. The Labour party, the TUC and many Liberal Democrats will take pleasure in blaming everything not on the past but on the present, on the Tories. In vain will Cameron plead that blame should lie with Brown and his Labour colleagues. In vain will he plead that a cut is not a cut when it is a freeze or merely a shift in priorities. His and Osborne’s post-election “softening up” is returning to haunt them. The coming winter is unlikely to see a festival of political reason.

Cameron is relying heavily on his deal with Nick Clegg to guard his parliamentary majority. The tactic has held so far, but the conference season and rising cuts hysteria will test it to destruction. The Labour movement may not be able to field big armies, but it will generate public sympathy over cuts and exploit the electoral vulnerability of the Liberal Democrats. Yesterday’s Times-Populus poll had three-quarters of respondents rejecting both the speed and the scale of the cuts, with those pessimistic about the economy rising from 8 to 33%.

The coalition needs to head for higher ground, and fast. Cameron must find some way of diverting responsibility on to others, much as Brown diverted blame for his domestic credit crunch on to “the world economy”. There is already talk of one such move. The fraud and cheating that infects social benefits is attributed to agencies having no incentive to police them. The government is thinking of handing two benefits, covering housing and council tax, to local councils to administer, with an annually declining cash budget from the centre, to force local staff to bear down on fraud.

By ending Whitehall direction, the government would insist that benefit rules and discretions would thenceforth be for local councillors to determine, such that the arrow of blame would not point entirely at ministers but be shared with local electors. The chief obstacle to such wise decentralisation remains the Treasury. Its aversion to wasteful spending is still exceeded by its addiction to control, however inefficiently administered from Whitehall.

Delegating housing and council tax benefit will do little to mitigate the coming storm. Somehow Cameron must harness a renewed stability of public finance to his belief in widening the political community, his “big society”. At present he sees this only in vague terms, with more “free” schools, social enterprises and volunteering.

If he truly means to redirect public services down to communities, he cannot avoid re-empowering elected local government, however distasteful he and his colleagues may find it. Across Europe and America, subsidiary democracy is sharing in the responsibility for curbing public spending. Only in Britain is blame entirely nationalised.

Already local councils, many of them with strong Liberal Democrat membership, have strode ahead of Whitehall in slimming their spending in anticipation of cuts. But they remain circumscribed by Treasury “silos”, preventing them shifting money between priorities. This enables them to blame the centre for even the smallest cut in a particular budget item, a blame they now broadcast with abandon.

If Cameron wants to diversify responsibility for public service cuts, he must properly uncap council taxes, as in any other civilised democracy. He must allow councils to ask their voters if, and how far, they want local services protected from cuts. If people want to keep open their museums, libraries, parks, sports clubs and day centres, that should be their local right. Cameron is foolish to accept the blame for closing them.

The hard times facing the public sector may be largely caused by Labour, but that is not how the public will see it. The acrimony against the cuts now ballooning over British politics offers Cameron little scope for his “cuts partnership” fantasy. He is going to experience hell over the coming year. He urgently needs to pluralise blame. He needs to shift it downwards.